BlackBerry CEO unfairly mocked for questioning tablets’ dominion

BlackBerry CEO Thorstein Heins mentioned in a Bloomberg interview Tuesday that he thought that In five years I dont think therell be a reason to have a tablet anymore. He was quickly denounced for ignoring the iPad, not owning up to the failure of BlackBerrys own PlayBook tablet, and in general for trashtalking tablets and being hopelessly out of touch.

And those are just the nicer comments.

But perhaps hes not quite as out of touch as hes painted. For one thing, he actually said something quite different from what everyone claims he said.

The Bloomberg story that summarizes the Heins comments that ricocheted over the Internet yesterday actually draws from two separate interviews he gave at this weeks Milken Institute 2013 Global Conference in Los Angeles. One presumably was an interview with Bloomberg reporter Hugo Miller (or possibly the co-bylined reporter Nadja Brandt) who wrote the online story; the second was a five-and-a-half minute on-air talk with Willow Bay for Bloomberg Television's "Lunch Money segment.

The online story quotes only three sentences by Heins about tablets, with no context and apparently no follow-up questions to clarify or expand on them:

In five years I dont think therell be a reason to have a tablet anymore. Maybe a big screen in your workspace, but not a tablet as such. Tablets themselves are not a good business model.

So we dont know why Heins thinks that there wont be a reason to have a tablet in five years; or what he sees developing to make that happen. And we dont know what he means by saying tablets are not a good business model.

Nevertheless, Twitter lit up with reactions that persistently claimed Heins said something that he did not in fact say. Heres a sampling:

"#Tablets and Thorstein Heins. He just doesn't want to play catch up" cafe moba @cafemoba

"BlackBerry CEO: Demand For #Tablets Will Die Out in 5 Years. me: if we thot for second that company got it, no more" Jeff Hasen @jeffhasen

BlackBerry CEO says #tablets will be useless in five years" Lafayette PC @LafayettePC

Surprisingly, its the TV interview that adds a bit more of Heins thinking, though Willow Bay mainly focuses on business issues.

Heres what he said, transcribed from the video clip:

As Ive always said, the tablet market is very challenging from a pure hardware perspective. Very few companies can make money on the hardware. And so, if we want to do it, we need a service-value proposition on top of that. Some of that will be shown at BlackBerry Live. But we are running with a different concept that makes THIS [waving a new BlackBerry Z10 touch smartphone] your personal mobile computing power, and only this&so its a slightly different approach to the market.

Among other things, Heins reveals that the upcoming annual BlackBerry Live user conference, May 14-16, in Orlando will reveal some of BlackBerrys attempt to create a compelling service-value proposition for mobile users.

BlackBerry CEO Thorsten Heins Says Tablets Not A Good Business Model, Evidently Forgetting About iPad mocks the headline to Darrell Etheringtons story at TechCrunch.

Heins shouldve stuck to specifics, however, as he went way overboard and came off as though he was losing touch with reality in the interview as quoted by Bloomberg, with broad sweeping statements like In five years I dont think therell be a reason to have a tablet anymore, and [t]ablets themselves are not a good business model, Etherington proclaims.

But a closer look shows Heins has a firmer grasp on reality than Etherington. Heins is surely correct when he says that very few companies can make money on the hardware. His comment is a clear reference to Apple, because Apple is one of the very few companies, and maybe the only one, with a tablet product that returns a very high profit. Trying to imitate or catch up to Apple in hardware profitability, because of the latters highly integrated and capital-intensive approach to products, is impossible for a company like BlackBerry in todays market (as it is also for Apples other tablet rivals so far).

Thats why Heins argues that BlackBerry, and possibly any tablet company, needs a service-value proposition on top of the device itself. Amazon seems to believe exactly the same thing: its not releasing sales figures for its Kindle tablet line, but its aggressive pricing shows its not even trying to make money on hardware; and its integration with Amazons service offerings are exactly the kind of service-value proposition that Heins says is necessary.

That combination made Amazon the No.3 tablet vendor in the fourth quarter of 2012, trailing Samsung and Apple, according to IDC data presented by CoolSmartphone.com. A key part of Samsungs success in both tablets and smartphones lies in its extraordinary spending level for advertising and sales promotion. [see "The cost of selling Galaxies, continued" by Asymco's Horace Dediu.] Even combined, Amazon and Samsung sold 9 million fewer tablets than Apple in that quarter.

I think that the tablet form factor clearly has become popular for a good reason, and I dont think that this form factor is a passing fad, says Rich Adduci, senior vice president and CIO, global information systems, for Boston Scientific, Marlborough, Mass., where he oversees an iPad deployment in the thousands. I think that the tablet provides a different way to perform tasks that previously could only be done with a PC and also allows you to do many things that could never be done on a PC&for those reasons I believe tablets will be around for quite some time.

That fits with the assessment of Asymcos Horace Dediu. Tablets have proven very popular because they fit within certain consumption niches, he says. They are comfortable and very functional in settings in which other products are less so. In other words, they are hired to do a job that few other products do well. Some of these jobs are in the workplace and some are at home.

Where Heins may be mistaken, he suggests, is in apparently believing that people want, or need, or can afford only one device. If you only could have one device then perhaps a smartphone would be the best single option, but users are increasingly using multiple devices, Dediu says. Just like families tend to have more than one car, it makes sense, given the price, for people to use more than one device and use the best product in a given setting.

History has shown that when a new form factor emerges it does not become the exclusive option, he adds. Consider how laptops have taken root: at first they were not very good PCs with many compromises but over time they became great PCs. That does not mean that there are no desktops anymore. So people will own multiple computers and multiple tablets and phones.

Another analyst suggests Heins had a more limited market in mind: the enterprise. Heins comments were foolish, but I dont think he meant to say that nobody will be using tablets in five years, says Avi Greengart, research director for consumer devices at Current Analysis. Rather [hes saying] that hes unclear how BlackBerry can be successful with enterprise tablets in that timeframe.

Somewhat surprisingly, Greengart actually agrees with Heins up to a point. Thats far more reasonable: many knowledge workers really wont be using tablets in five years, he says. Theyll be using devices connected to a larger display. Some of those devices may be traditional laptops or desktops, and some may be phones or tablets. If Heins doesnt think BlackBerry will be successful in that space, who am I to argue?

But given the fact that many of those devices will be owned by employees, why wouldnt the same dynamic of using a personal mobile device in conjunction with an available big screen be present outside the office as within it? If yes, then its at least conceivable that buying decisions could change.

So Heins seems to be right in saying that tablets so far have not proven to be a good business model, for everyone but Apple. And hes certainly right in saying that the tablet market is challenging because its very difficult to make money on hardware alone, for everybody but Apple.

Finally, regarding his belief that there wont be a need for tablets in five years, Heins ironically seems to have more faith, whether justified or not, in innovation than the technology bloggers and pundits who continually call for more of it, and complain that Apple has lost it. He seems to believe that the pace and quality of innovation really could change the mobile market into something quite different five years from now.

According to figures at AAPLInvestors,it took the iPod 24 quarters to reach 119 million in total sales; 17 quarters for iPhone to reach just under 129 million; and just 11 for the iPad to reach 121 million in total units sold.

The pace of innovation gives at least some credence to the idea Heins may be reading the market more realistically than his critics. If he turns out to be right, then perhaps in 2018 well look back on tablets the same way that, today, we look back on mp3 music players.

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